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Hungary: Government Cracks Down On Foreign Land Deals

Since the fall of communism, the people of Central and Eastern Europe have been wary of the prospect of foreigners coming in and buying up relatively inexpensive land. RFE/RL correspondent Tony Wesolowsky reports that for some people in Hungary, that worry has now become a reality.

Prague, 2 August 2001 (RFE/RL) -- In three counties on Hungary's western fringes, up to a quarter of the land has been purchased by Austrians. But according to Hungarian Prime Minister Viktor Orban, a majority of these sales violate the country's ban on foreign ownership of arable land.

Vowing to crack down on illicit land sales, Orban has set aside $17.7 million in government funds to buy back illegally purchased farm land. He has also set up a telephone hotline to trace down perpetrators of the questionable deals.

In a particularly sharp remark cited last month by a Western news agency (AFP), Orban said, "Austrian farmers who have bought land here should be glad if they can save their skins." He then added a softer comment, saying: "It's enough if they leave. Then we [will] welcome them back later as tourists."

Austrian officials have been more cautious in their comments on the affair. Some have dismissed Orban's rhetoric as mere campaigning ahead of Hungary's general elections next year. Others wonder how Hungarian officials can distinguish between illegal land deals and the legitimate purchases by foreigners that were permitted in Hungary in the early 1990s.

Hungary, which has over 46,000 square kilometers of farm land, outlawed such sales in 1994, four years after land privatization began. The move was supported by both officials and citizens alarmed by the growing number of foreigners -- many of them Austrians living in the border region of Burgenland -- who were buying up large tracts of inexpensive land.

The land issue is a sensitive one for European Union candidate countries in Eastern and Central Europe. In its negotiations with the EU, Hungary has struck a deal allowing it to enforce a temporary ban on land sales to foreigners once it joins the union, which may happen as soon as 2004. Exceptions will be made for foreigners with three years' residency in Hungary. Justice Minister Ibolya David has said he expects land prices to jump up by "10 to 15 times" once Hungary joins the EU.

Not all Hungarians are opposed to selling their land to foreigners. To get around the existing ban, some landowners have resorted what so-called "pocket contracts."

Zoltan Szekeres, the president of the Hungarian Real Estate Association, spoke to RFE/RL about how the contracts work. He says many of the deals are off the books, meaning the agreements are not registered with Hungary's Land Registry Office. Most of the transactions take the form of leases, beneficiary agreements, and purposely undated sales.

In such instances, Szekeres says, the hope is that such deals will become valid once the land-sale ban is lifted -- which is due to happen seven years after Hungary joins the EU. In the meantime, the deals are kept unregistered -- and, as Szekeres explains, hidden from the prying eyes of the state:

"In this kind of pocket contract, land is sold to a foreigner, and [the contract] is maintained [and] guarded [in] the pocket."

In the three Hungarian counties under dispute -- Vas, Zala and Gyor-Moson-Sopron -- Orban has said as much as 25 percent of the arable land is owned by foreigners.

But Ernst Zimmerl, the agricultural attach at the Austrian Embassy in Budapest, questions the figure, saying there are no statistics available to distinguish land purchased legally from land purchased after the ban on foreign ownership was passed:

"We don't know. We have no statistics regarding the land which was purchased by foreigners -- [including] Austrians -- between 1990 and 1994. Some land was even arrogated not by Austrians, but by former Hungarians who came over the last 30 years to Austria. So we have no statistics on how much of the 70,000 hectares, which were mentioned by Mr. Orban, were purchased or arrogated before 1994."

Franz-Stefan Hautzinger, president of Austria's Burgenland Chamber of Agriculture, says Orban's remarks have left many Austrian farmers -- even those who legally farm Hungarian soil -- feeling threatened. The "Budapest Sun" quotes Hautzinger as saying: "This chamber will give maximum legal assistance to any Austrian farmer who purchased land via so-called 'pocket contracts' since 1994."

According to Szekeres of the Hungarian Real Estate Association, the root of the current land dispute lies in the country's privatization drive in the early 1990s. He says when farmland was returned to its original owners, they often lacked the livestock, machinery, and know-how needed to work their newly returned property. But when the owners turned to Hungarian banks for loans, he says, more often than not they were turned down:

"It was very difficult, [much] as it is today, to receive money from banks for agriculture, because the banks are not sure in the return on the money. A big majority of the land is in little parcels, and today, with such little parcels it is difficult to cultivate the land economically."

But while their own banks turned them away, Hungarian landowners were welcomed with open arms by their counterparts across the border in Austria. With farmland selling for up to $10,000 a hectare at home, Austrian farmers were eager to buy land in western Hungary -- where, Szekeres says, a hectare currently sells for between 30,000 and 50,000 forints, or between $100 and $170 on the domestic market. Unable to receive bank loans, some Hungarian farmers gladly sold their land to the Austrians for up to $3,300 a hectare.

Now, however, many Hungarians resent the Austrian presence. Last month (17 July), Orban convened a special government session in the tiny village of Kalocfa, some 200 kilometers southwest of the capital Budapest. Residents there reportedly are unable to increase the area of their farm land because of the preponderance of Austrian landlords.

Hungarian farmers are not the only ones to give up land. A news agency (AFP) reported that the government itself sold a large parcel of land, located in the western Hungarian town Bardudvarnok, to an Austrian farmer in 1992. The farmer then sold the land to two Austrian businessmen, who, in the end, got more than they bargained for. In purchasing the land, the two unwittingly also became the owners of a part of the town's infrastructure, including power cables and 240 of the town's 270 roads.

Orban has pledged to do what he can to rectify the situation in Bardudvarnok. His spokesman, Rudolf Viragh, told reporters the Hungarian government is looking into whether the parcel in Bardudvarnok can be exchanged for state-owned land elsewhere. But Viragh admits that would break the country's current law outlawing foreigners from acquiring farm land, whatever the means of exchange.

The Hungarian government is stepping up efforts to retake the farm lands now in foreign hands. On 25 July, it announced it was setting aside $17.7 million to buy back illegally purchased farm plots. The National Land Fund is due to be in operation sometime before this fall's parliamentary session.

Officials say Hungarians who have signed "pocket contracts" do not face the prospect of criminal charges if they cooperate with authorities. Justice Minister David has also promised to introduce legislation ahead of the parliamentary session to plug up any loopholes still allowing such contracts to be made.

Hungary is not alone on the issue of foreign land ownership. The Czechs and the Poles have voiced similar concerns. In May, the European Commission proposed a seven-year grace period for the purchase of agricultural and forestry land for Hungary, the Czech Republic, Poland, Slovakia, and Bulgaria once they enter the EU. Such transitional periods are not new. Sweden had similar restrictions on foreign land ownership before it joined the EU in 1995. Those restrictions were eliminated by the end of 1999.

Today, virtually any EU citizen can buy or sell land or property within the EU. Switzerland, which is not an EU member, does allow foreigners to buy real estate and land, but only after they have lived in the country for five years.

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    Tony Wesolowsky

    Tony Wesolowsky is a senior correspondent for RFE/RL in Prague, covering Belarus, Ukraine, Russia, and Central Europe, as well as energy issues. His work has also appeared in The Philadelphia Inquirer, the Christian Science Monitor, and the Bulletin Of The Atomic Scientists.